Do Israelis of Middle Eastern and North African descent still suffer from economic discrimination?
For decades it’s been an issue at the heart of Israeli social and economic policy and the source of political grievances by Mizrahim going back to at least the 1970s.
Two studies, one by the Finance Ministry and the other by the government’s National Insurance Institute, say that although discrimination remains – even into the second decade of the 2000s – it has now become marginal. In fact, the dominant factor in Israeli socioeconomics is the overall high level of social mobility.
Both studies examined the problem by looking at social mobility, that is, the ability of children to do better than their parents in terms of income. The studies looked at 35-year-olds born between 1975 and 1985.
The NII study found that children of Ashkenazi parents who earned at a 25% income level 35 years ago – in other words, who were relatively poor, since 75% of Israelis earned more than they did – reached an income level of 55% to 75% by age 35. For Mizrahi children, the average jump from their parents’ earnings was from 25% to 51%.
A similar study by the treasury found a narrower difference of 47% versus 45%.
The studies show that discrimination continues to exist, but the problem is largely behind us. Moreover, they demonstrate that social mobility in Israel is remarkably strong, as evidenced by many people’s ability to move up from an income level of 25% to 50% or more in the span of one generation.
Free market economists like to say that the goal of a social-welfare state isn’t to reduce income inequality but to increase equality of opportunities. They have no problem with a society that counts homeless people at one end of the income ladder and multi-billionaires at the top. Society needs to reward enterprise and ability and the only problem is how to ensure that someone who has these traits can exploit them.
Socially-oriented economists say otherwise. They believe that equality of opportunity simply papers over the real problems of income gaps and poverty, which lead to political instability and even slow economic growth. They point to studies that show inequality deters social mobility and equality of opportunity.
Thus the results of the NII and treasury studies are a surprise. They show that even though income inequality in Israel is high by global standards, equality of opportunity is high, too. Unusually, Israel has both a high Gini score (a measure of income inequality) like China, the U.S. and Singapore, and high levels of social mobility like Canada and Denmark.
This is a fascinating find. It shows that Israel is succeeding on a socioeconomic plane far better than the public believes. Despite our terrible rates of poverty and inequality, children do get the chance to better themselves. It passes the standards of economists from both ends of the political spectrum.
But before we put a feather in our caps, we should look at two other data points from the reports that aren’t nearly as encouraging.
One is that social mobility in Israel exists, so long as you are Jewish – but not ultra-Orthodox. The treasury study found that even in the weakest subgroups, such as Israelis of Ethiopian origin, Jews born at the 25% level rose to the 41-47% level by age 35.
Among Haredim, however, there was no social mobility at all, and in many cases children fell to a lower income level percentage in adulthood than their parents had. This is because fewer and fewer ultra-Orthodox men join the labor force.
Israeli Arabs do better than their parents, but they struggle to do so. Those born at the 25% level on average reach the 36% mark by 35 years old. Given that Israeli Arabs have worked hard to improve their education and enter the labor force in recent years, it is quite clear that they face a glass ceiling of racism.
Another disturbing statistic is the one that shows how hard it is to enter the top tenth of income earners. As relatively easy as it is to climb from the 25% level to the 50% within a generation, it’s nearly impossible for a child from the bottom tenth to rise to the top tenth in adulthood – in fact, harder than in the relatively immobile United States.
It works the other way as well: Children whose parents are in the top tenth of income earners are highly unlikely to find them at the bottom by adulthood. In other words, if you’ve been born with a silver spoon in your mouth, it’s going to be very hard to remove it. Those at the top know how to ensure their offspring stay there.